Tax policies to protect incomes and support jobs

Published:15 Dec 2016 15:34

Income tax frozen and business rates reduced.

Scotland’s tax policies will protect household incomes and support jobs, Finance Secretary Derek Mackay said today as he froze the basic rate of income tax and extended the small business bonus scheme to exempt 100,000 small premises completely, reduced the business rates poundage by 3.7%, and took 8,000 businesses out of the large business supplement.

Outlining the Scottish Government’s tax policies to Parliament, he said that income tax must not be used to pass on the cost of austerity to the lowest income taxpayers and that the protection of public services is more important than substantial income tax cuts for the top 10%.

Setting out the Scottish Government’s proposals, the Finance Secretary announced that for 2017-18:

the basic rate of income tax will be frozen at 20 per cent.

the higher rate of income tax will be frozen at 40 per cent.

The higher rate payment threshold will be frozen in real-terms at £43,430

the additional rate of income tax will remain at 45 per cent and the threshold will be unchanged

100,000 properties will be exempt from business rates under the small business bonus scheme by increasing the 100% relief threshold to £15,000

the overall business rates poundage – the core tax rate that applies to the rateable value of business properties – will be cut by 3.7% to 46.6p.

the threshold for the large business supplement will be increased to £51,000 restricting liability to the very largest businesses and excluding 8,000 business properties

the residential and non-residential rates and bands for Land and Buildings Transaction Tax (LBTT) will remain unchanged

the Standard Rate of Scottish Landfill Tax (SLfT) will be increased to £86.10 per tonne and the Lower Rate of SLfT to £2.70 per tonne in line with RPI inflation and landfill charges in the rest of the UK.

“Let me be clear, I will not pass the costs of UK austerity on to the household budgets of the lowest income taxpayers.

“I will protect low and middle income taxpayers at a time of rising inflation by freezing the basic rate of income tax.

“However, we cannot accept that at this time of austerity top earners should benefit from an inflation-busting tax cut. So I will limit the increase in the Higher Rate Threshold to inflation and not give a substantial real-terms tax cut to the top 10% of income earners.

“The higher rate threshold will be set at £43,430 and, while I sympathise with those who have argued for an increase to the additional rate, I have had to balance that with the risk to our economy and am maintaining the current rate.

“This Government’s approach is the right thing to do, for our economy, for jobs and our public services.”

Mr Mackay continued:

“For the first time, there is now a direct link between Scotland’s economic performance and public spending.

“I am pleased to set out today measures that confirm a highly competitive business rates regime for Scotland in 2017-18, particularly for the thousands of small businesses in Scotland

“First, I will reduce the business rates poundage by 3.7 per cent to 46.6p;

“Second, we will expand the Small Business Bonus Scheme by raising the eligibility threshold for 100% relief to a rateable value of £15,000 - lifting 100,000 properties out of rates altogether.

“Third, while I have listened carefully to business, just as I cannot cut tax for the wealthiest individuals, I cannot cut the rate of the Large Business Supplement.

“However, I will restrict the supplement to the very largest businesses by increasing the threshold to £51,000, reducing the tax burden on 8,000 businesses.

“The poundage cut, The Small Business Bonus extended, and the Large Business Supplement focused only on the very biggest businesses.

“That is a good deal for Scottish business and a great deal for Scottish jobs.”

Background

Scottish Income Tax proposed rates and bands 2017-18

Scottish income tax rates

Scottish Bands

Scottish Basic rate 20%

Over £11,500* - £43,430

Scottish Higher rate 40%

Over £43,430 - £150,000

Scottish Additional Rate 45%

Over £150,000 and above**-

* Assumes you are in receipt of the Standard UK Personal Allowance

** Personal Allowance reduced by £1 for every £2 earned over £100,000

Land and Buildings Transaction Tax: proposed rates and bands for residential and non-residential property transactions, 2017-18

Purchase price (Residential transactions)

LBTT Rate

Purchase price (Non-residential transactions)

LBTT Rate

Net present value of rental payments (Non-residential leases)

LBTT Rate

Up to £145,000

0%

Up to £150,000

0%

Up to £150,000

0%

Above £145,000 to £250,000

2%

Above £150,000 to £350,000

3%

Above £150,000

1%

Above £250,000 to £325,000

5%

Above £350,000

4.5%

Above £325,000 to £750,000

10%

Above £750,000

12%

Scottish Landfill Tax: current and proposed rates per tonne of material